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A Higher Minimum Wage Will Kill Jobs: Not So Fast

Department of Labor hiring statistics show more jobs in states with a higher minimum wage.

Contrary to what you might thing, raising the minimum wage may be just what small businesses--and the economy overall--need most right now.

Most of the 13 states that raised their hourly minimum wage above the national average of $7.25 at the beginning of the year experienced higher job growth than the 37 states that did not, according to a recent Associated Press story.

The average job increase in the first six months of the year for the states with higher minimums was 0.85 percent, compared to 0.61 percent for the remaining states. The one exception was Vermont, with a minimum wage of $8.73, where employment growth was essentially flat. 

While six months of data may not mean that much in the long run, the numbers run counter to the expectations of many business groups that oppose raising the federal minimum wage to $10.10. This winter, the Congressional Budget Office estimated that raising the minimum wage could cost the economy about 500,000 jobs, or 0.3 percent of the workforce, by 2016. 

The CBO also reported that a federal increase would affect 16.5 million workers, adding $5 billion in real income to families whose income is currently below the poverty threshold, and $12 billion to families whose income is currently between one and three time poverty level. Those expected to lose jobs would be disproportionately teenage workers, who earn the least, the CBO says.

Washington State, which has the highest minimum wage at $9.32, saw a year-over-year job increase of 2.2 percent as of June. New Mexico, whose state minimum wage is below the federal minimum at $7.50, saw a decrease of 0.05 percent for the same time period.  

Seattle recently passed legislation to increase the city's minimum wage to $15, starting in 2015.

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Last updated: Jul 21, 2014

JEREMY QUITTNER | Staff Writer | Staff Writer, Inc. and Inc.com

Jeremy Quittner is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.




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